Santander UK Does A good Job In The BoE Stress Tests

According to the stress tests carried out by the Bank of England (BoE), the UK banking system could absorb £50 billion of losses with the capital they have in excess of the minimum requirements. This means they would be in a position to continue to provide the credit the economy might need in a very adverse situation.

Along with Nationwide, Santander UK was the bank which did a better job in the test. In the negative scenario proposed by the BoE, the Spanish lender’s UK subsidiary would maintain a capital ratio of 9.7% of assets, clearly above the 7.6% bar it had to exceed.

The BoE says that this includes a drop of 50% in US stock prices, a rise in unemployment in the UK to 9.5%, a hike in interest rates to 4% or a decline of 33% in property prices in the country. So its conclusion is that the banks could face losses of up to £50 billion (55.942 billion euros) and continue to serve the real economy.

The vast majority of Santander UK’s assets correspond to mortgages. Under the BoE’s hypothesis, the biggest losses would occur in other positions with greater risk, like loans to real estate developers, consumer loans or portfolios of shares in the international markets. In total, the sector would suffer losses of £48.7 billion if that crisis happened.